The launch of open banking in Canada is expected to cause a disruption in the finance ecosystem and dramatically change how banks work with one another and with other businesses. The term Open Banking has been declared many times up until recent years but only in the past few years, policymakers globally have started to introduce regulations that will create progress on the issue. Earlier last year (2019) the Canadian Department of Finance[i] officially started the transformation process and released consultation papers that challenge open banking and its consequences to financial data of customers.
Up until the present time, banks have always held all customer information along with spending data. This change in the financial system will give access to that data to banks and businesses only if the customer has given their permission. The main idea of open banking is to give the customer more control over their data and manage how it’s used by banks and other parties.
What is Open Banking?
The term “open banking”, also known as “open bank data”, means giving digital access to the banks’ internal customer data to other parties in a secure way. This new system allows other businesses access to the financial data of banks’ clients to provide new offerings and better user experience.
Although it may sound like a new technological FinTech term, open banking is more about customers having more control over their financial data from Canada’s big banks. Also, along with many of the benefits it brings[ii], open banking also carries cyber security and fraud risks that may delay many businesses and customers to start using it.
Another example of open banking in action would be that a customer would be able to use a single app to track their financial transactions and status while also having the instant reach to their financial advisor.
Benefits of Open Banking
It offers many possibilities such as facilitating client identification and enabling customized financial services also at lower prices for better customer experience. The majority of customers in Canada use a single bank for all their investments and savings. But with open banking, they would be able to have many different accounts with different providers that include fin-tech companies as well, manageable in an integrated manner.
While open banking may mean better services and rates for customers, for FinTech companies it’s an opportunity to provide innovative products and services to consumers. For instance, imagine being able to view all of your new purchases and investment-related questions on a single app.
Open Banking Governance
Open banking has already started shaking the core of financial systems around the world especially in the UK[iii] and the EU[iv] where some open banking frameworks have started being adopted.
The Canadian government has acknowledged open banking yet have at times appeared slow[v] in their ability to make progress on the issue. In reality, the potential risks associated with open banking and sharing customer data is one of the reasons why the government has been so slow to adopt any open banking framework.
It is clear however, that if Canada fails to create a regulatory environment to facilitate open banking, it would mean falling behind other countries and risking further development and innovation in the financial industry.
and Google to name a few. Since our inception, we’ve translated those early successes into helping many of the largest corporations in both Canada and the US, drive usage and deliver user-centric experiences to their employees and clients.
We’ve become a leader in transformative digital experiences and continue to take a user-first approach to ensuring that the end customer is at the centre of our planning, across all channels and interactions.
Veriday’s diverse experience, products and professional services have allowed us to effectively tailor enterprise solutions for partners operating across industries including healthcare, financial services, government, insurance and engineering, providing us with critical insights and deep customer relationships throughout North America.
[i] Department of Finance Canada Launches Consultations on Open Banking, by Department of Finance Canada | January 11, 2019
[ii] Why Canada needs open banking, by Bryan Borzykowski | Mar 11, 2019 | Moneysense
[iii] The future of money, where you’re in control | Open Banking Limited 2020
[iv] Building a Digital Europe | European Commission
[v] Canada is dragging its heels on open banking, by Soheil Karkhanechi | September 9, 2019 | The Globe and Mail